The number of cellular M2M connections will rise from 143.7 million in 2012 to 478.1 million in 2017, when they will account for 5.6% of total mobile subscriptions, according to a new report from Pyramid Research.

Over the same timeframe, airtime revenues will grow from $4.9 billion to $13 billion, says Pyramid.

With government policy and regulation largely driving the M2M agenda in most parts of the world, China is set to become the largest market this year, overtaking the US, while Brazil is on course to be third biggest in 2017 – thanks to telematics regulations that are driving penetration in vehicles.

Similar telematics rules are likely to propel Russia into fourth place, claims Pyramid.

The market-research company says that the market in North America slowed in 2012 because of a shift away from cellular-based e-readers and as the smart-meter market begins to mature.

Regulatory support will be largely responsible for making telematics the largest M2M segment in terms of revenue in 2013, although cellular technology holds a strong position in this area compared with alternatives like satellite.

In terms of subscriptions, the utility segment will lead the way, driven by smart-meter adoption that is typically mandated by policymakers.

Pyramid says operators are taking a variety of approaches to the M2M opportunity, from the passive and low-risk approach of working through resellers to the end-to-end approach epitomized by the Verizon Communications (New York, USA) takeover of Hughes Telematics (Atlanta, USA) last year.

Nevertheless, large operators have an advantage because wide coverage and international roaming capability are so important in many M2M applications.

Indeed, most operators still take a passive approach to M2M, says Pyramid, partly because larger rivals are better positioned but also because the market opportunity is not mature enough for some companies to address the M2M opportunity directly.